U.S. Manufacturing Activity Shows Modest Contraction In March

With the coronavirus outbreak weighing on demand, the Institute for Supply Management released a report on Wednesday showing a contraction in U.S. manufacturing activity in the month of March.

The ISM said its purchasing managers index dipped to 49.1 in March after edging down to 50.1 in February. While a reading below 50 indicates a contraction in manufacturing activity, economists had expected the index to show a steeper drop to 45.0.

The modest decrease by the headline came as the new orders index tumbled to 42.2 in March from 49.8 in February, hitting its lowest level since March of 2009.

The production index also fell to 47.7 in March from 50.3 in February, while the employment index slid to 43.8 from 46.9 in the previous month.

The report also said the prices index plunged to 37.4 in March from 45.9 in February, indicating the fastest decrease in prices since January of 2016.

"Comments from the panel were negative regarding the near-term outlook, with sentiment clearly impacted by the coronavirus (COVID-19) pandemic and energy market volatility," said Timothy Fiore, Chair of the ISM Manufacturing Business Survey Committee.

On Friday, the ISM is scheduled to release a separate report on activity in the U.S. service sector in the month of March.

The non-manufacturing index is expected to tumble to 44.0 in March after climbing to 57.3 in February, with a reading below 50 indicating a contraction in service sector activity.